Ceat Tyres of India Ltd. Vs. Union of India - Court Judgment

Excerpt:
(i) excise - construction - rule 56a of central excise rules, 1944 - appellants purchased tyre cord wrap sheet (tcws) for manufacture of tyres and tubes - earlier tcws not liable for duty under tariff item 19 or 22 of central excise tariff - on fresh notification it was covered under tariff item 22 therefore liable to duty - appellant contended they were entitled to performa credit since they complied with sub-rule (3) of rule 56a - facts revealed that neither finished excisable goods nor component part included in list of items mentioned in notification to which performa credit procedure applicable - appellants did not comply with sub-rules (1) and (2) of rule 56a - held, petitioners not entitled to claim performa credit under rule 56 as compliance under sub-rules (1) and (2) of rule 56a was also necessary. (ii) exemption from duty - central government notified that synthetic rubber used in manufacture would get exemption from payment of duty on final product - petitioners claimed exemption as synthetic rubber used in manufacture of final product tyres - defendants contended that synthetic rubber used in manufacture of tcws and not tyres - court gave wide meaning of word 'manufacture of final products' concluded that synthetic rubber used in manufacture of final product tyres. - - 11. secondly, on the question of exemption, shri desai contended that in a fiscal statute like the central excises and salt act, 1944, the words have to be construed strictly. (2) the collector may, on application made in this behalf and subject to the conditions mentioned in sub-rule (3) and such other conditions as may from time to time be prescribed by the central government, permit a manufacturer of any excisable goods specified under sub-rule (1) to receive material or component parts of finished product like asbestos cement, on which the duty of excise or the additional duty under section 3 of the customs tariff act, 1975 (51 of 1975), hereinafter referred to as the countervailing duty, has been paid in his factory for the manufacture of these goods or for the more convenient distribution of finished product and allow a credit of the duty already paid on such material or component parts or finished product, as the case may be :provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods -(i) if such finished excisable goods produced by the manufactur a perusal of the list of goods, to which the performa credit procedure is applicable by virtue of the notification issued by the central government under sub-rule (1) of rule 56a, clearly shows that neither the finished excisable goods nor the component part form part of the long list of items mentioned in the said notification. the relevant rule does not give discretion to the assistant collector to accept any other documents for being satisfied that excise duty has been paid on the product in respect of which credit is being claimed. those which, as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end-product :those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end products and those, as here, which might be burnt-up or consumed in the chemical reactions.a.v. savant, j.1. by this petition, the petitioners - ceat tyres of india ltd. and a shareholder of the company seek to challenge the legality and validity of the communication dated 23rd august, 1982, exh. 'u' to the petition. by the said communication, the petitioners' claim for exemption from payment of excise duty under the notification, exh. 'f', dated february 28, 1982 has been deferred in the sense that the communication deserves that the petitioners had filed a writ petition in the delhi high court on the question of the processed tyre cord fabrics falling under tariff item 19 or 22 of the central excise tariff. since the said writ petition in the delhi high court was pending, the question of granting exemption under the notification, exh. 'f', could not be considered till the case was decided by the delhi high court. a few facts necessary for the purpose of the controversy may be stated as under :- 2. the first petitioner is a company incorporated under the companies act, 1956, and the second petitioner is a shareholder of the first petitioner company. the first petitioner 'company' manufactures tyres and tubes to be filed to motor vehicles and other equipments and for this purpose has a factory at bhandup, bombay. for the purpose of manufacturing tyres, the company purchases, inter alia, diverse raw materials and components. amongst such components is a product known as tyre cord warp sheet (for short, 'tcws'). this tcws is made out of either rayon or nylon. in para 6 of the petition, the petitioners have set out the process of manufacture of tyres. the petitioners also purchase synthetic latex or synthetic rubber which is used in the dip solution known as 'rfl' solution. the tcws are dipped in the said solution and are, thus, processed or rubberised. after processing the tcws in the said solution, the tcws are known as processed or rubberised tcws. the processed or rubberised tcws are used in the manufacture of tyres. it appears that, initially, under the tariff advice issued by the central board of excise & customs bearing no. 30 of 1978, dated 12th june, 1978, at exh. 'a' to the petition, the tcws was held not to be a fabric liable for duty either under tariff item 19 or 22, but was held to be falling under tariff item 68 viz. the residuary item. however, pursuant to a judgment of the supreme court, a fresh notification was issued on the 1st september, 1980 - exh. 'b' to the petition, under which it was held that tcws would be covered by tariff item 22 of the central excise tariff and hence, the tcws would be a fabric and processing duty on such fabric may have to be charged. 3. on 17th december, 1980 the company was asked to pay the excise duty on the tcws falling under tariff item 19 or 22. it may be stated here that item 19 deals with cotton fabric, whereas item 22 deals with man-made fabric. since the company is using the tcws made of nylon or rayon, there is no controversy that the said tcws falls under item 22. for challenging the letter dated 17th december, 1980, at exh. 'c' to the petition, requiring the company to pay excise duty on tcws, the company has filed writ petition no. 226 of 1981 in the delhi high court and on rule being issued on the 10th february, 1981, the delhi high court has granted interim stay in terms of prayer (a) of the said writ petition. since no reply was filed on behalf of the revenue, the interim order was made absolute on the 18th may, 1981. these orders of the delhi high court are at exhibits 'd' & 'e' to the writ petition. 4. on february 28, 1982, the central government issued notification no. 58/82 - central excise in exercise of its powers under sub-rule (i) of rule 8 of central excise rules, 1944, making further amendments in the notification no. 95/79 that was issued on the 1st march, 1979. by virtue of the said amendment dated february 28, 1982, at exh. 'f', three more items were added in the table under the earlier notification no. 95/79. for the purpose of the present petition, it is sufficient to reproduce the first item appearing at sr. no. 19 of the said table : ------------------------------------------------------------------------ (1) (2) (3) (4) (5)------------------------------------------------------------------------ 19. 16aa synthetic rubber 16 tyres, tubes and flaps.------------------------------------------------------------------------the notification dated 1st march, 1979 purports to exempt excisable goods of the description specified in column 5 above (tyres, tubes and flaps) from so much of duty of excise leviable thereon as is equivalent to the amount of - (a) the duty of excise plus the special duty of excise or as the case may be; (b) the additional duty leviable under section 3 of the customs tariff act, 1975 already paid on the goods of the descriptions specified in the corresponding entry in column 3 of the table. to put it briefly, if in the manufacture of the final product viz. tyres, tubes and flaps mentioned in column 5 of the table reproduced above, the input of synthetic rubber, mentioned in column 3 in the above table, was used, the manufacturer would get exemption from so much of the duty payable on the final product viz. tyres, tubes and flaps, as is equivalent to the duty paid on the input viz. synthetic rubber. notification no. 95 of 1979, dated 1st march, 1979, has two provisos which read as under : (i) the input specified in column (3) of the said table against a particular serial number in column (1) thereof are used in the manufacture of the final products specified in the corresponding entry in column (5) of the said table against the said serial number; and (ii) in relation to the exemption under this notification, the procedure set out in rule 56a of the aforesaid rules is followed.' 5. on the basis of this notification, exh. 'f' dated february 28, 1982, the company wrote to the 2nd respondent assistant collector of central excise on 2nd march, 1982 claiming what the company understood to be 'performa credit' in respect of the duty paid on synthetic rubber falling under tariff item 16aa used in the manufacture of tyres, tubes & flaps. the company submitted another application on march 3, 1982 for availing of, what the company called 'performa credit' under rule 56a of the central excise rules, 1944. the company supplied further details of its claim falling under the said notification. by his letter dated 2nd april, 1982, the 3rd respondent superintendent of excise informed the company that the benefit of the notification, exh. 'f', could not be granted to the company since synthetic rubber was used in the manufacture of processed tcws, which was an item falling under tariff item 19 or 22. since synthetic rubber was held not to be used in the manufacture of tyres falling under tariff item 16, the 3rd respondent informed by his letter dated 2nd april, 1982 at exhibit 'k' to the petition, that the company was not entitled to claim the benefit of the notification exh. 'f'. 6. again on april 9, 1982, the company reiterated its demand with the 3rd respondent, who by his letter dated 24th april, 1982 informed the company that the benefit of the notification exh. 'f' would be available only if synthetic rubber was used in the manufacture of tyres. since, however, the manufacturing process showed that synthetic rubber was being used in processing the tcws, which fall under tariff item 19 or 22, the company was not entitled to claim the benefit of the said notification. the company persisted with its demands with respondents nos. 2 and 3 and by a letter dated 3rd august, 1982, sent through its attorneys, the company called upon the respondents nos. 2 and 3 to grant the benefit of an amount of rs. 2,25,661.56 claimed as 'performa credit' under the notification at exh. 'f' dated february 28, 1982. the attorneys' letter dated 3rd august, 1982 has been replied by the impugned communication dated 23rd august, 1982 exh. 'u' referred to above, under which it has been observed that synthetic rubber was used in the manufacture of tcws and not in the manufacture of tyres. it has also been observed that on the question of duty payable on tcws falling under tariff item 19 or 22 since the company had approached the delhi high court, the question of allowing of the benefit of notification in respect of the use of synthetic rubber in the manufacture of tyres could not be considered till the case was decided by the delhi high court. it is this letter, exh. 'u', dated 23rd august, 1982 which has been challenged in the present petition. 7. on behalf of the respondents, assistant collector nagwekar has filed the affidavit-in-reply contending that synthetic rubber was used not in the manufacture of tyres falling under tariff item 16, as required under the notification, exh. 'f', but that synthetic latex or synthetic rubber falling under tariff item 16aa was used in the manufacture of tcws. since tcws was a separate intermediate product, the case of the respondents is that the petitioners are not entitled to claim the benefit of the notification, exh. 'f', dated february 28, 1982. the affidavit also stated that as far as the claim of the petitioners for 'performa credit' was concerned, the petitioners would not be entitled to claim any performa credit in view of the provisions of rule 56a of the central excise rules. 8. we have heard both the learned counsel at length viz. shri korde appearing for the petitioners and shri desai on behalf of the respondents. shri korde appearing in support of the petition has raised the following contentions : firstly, he submitted that the petitioners are entitled to claim 'performa credit' under the notification, exh. 'f', since they have complied with the procedure of sub-rule (3) of rule 56a. according to the learned counsel, since synthetic rubber was admittedly used in the manufacture of processed tcws and since processed tcws were used in the manufacture of tyres, the petitioners would be entitled to claim performa credit under the notification, exh. 'f'. he has relied upon two decisions of this court to which we will refer a little later. 9. secondly, shri korde contended that at any rate, the petitioners would be entitled to claim exemption under the said notification at exh. 'f'. since synthetic rubber falling under tariff item 16aa has been used in the manufacture of the final product viz. tyres, falling under tariff item 16. in support of his contention that having regard to the process of manufacture resorted to by the petitioners synthetic rubber must be held to be 'used in the manufacture of the final product', viz. tyres, shri korde has invited our attention to some supreme court decisions, to which we will make a detailed reference later. to sum up, shri korde contended that, in the first place, the petitioners would be entitled to claim 'performa credit' under the notification, exh. 'f', and secondly, at any rate, he contended in the alternative, that the petitioners would be entitled to claim exemption under the said notification, exh. 'f'. 10. on the other hand, shri desai, the learned counsel appearing on behalf of the respondents has contended, at the outset, that the petitioners have an alternate remedy by way of an appeal under section 35 and a further appeal to the tribunal under section 35b of the central excises and salt act, 1944. in support of his contention that it may not be proper for this court to entertain such a writ petition under article 226 of the constitution, shri desai has invited our attention to some decisions of the supreme court. on merits, shri desai contended that, in the first place, the petitioners are not at all entitled to any 'performa credit' since, admittedly, the petitioners do not comply with the substantive part of rule 56a viz. sub-rule (1) of rule 56a, as also sub-clause (a) of clause (ii) of sub-rule (2) of rule 56a. shri desai contended that in order to avail of the benefit of 'performa credit' under rule 56a, what was necessary was not the mere compliance with the procedure laid down in sub-rule (3) of rule 56a, but that it was also necessary to comply with the substantive part of sub-rule (1) and sub-rule (2) of rule 56a. 11. secondly, on the question of exemption, shri desai contended that in a fiscal statute like the central excises and salt act, 1944, the words have to be construed strictly. the words 'used in the manufacture of' appearing in the notification no. 95 of 1979, at exh. 'f', must be, therefore, according to the learned counsel, construed strictly. so construed, shri desai contends that, synthetic rubber cannot be said to have been used in the manufacture of tyres. submission is that on dipping the tcws in the dip solution, an intermediate product viz. processed tcws comes into being. it may be that processed tcws is used in the manufacture of tyres. but he contends that synthetic rubber cannot be said to be used in the manufacture of tyres and hence, no benefit of the exemption notification at exh. 'f' can be granted to the petitioners. finally, shri desai contends that, at any rate, on the question of exemption it would be necessary for the petitioners to approach the proper authority, who will decide the claim in accordance with law. shri desai did invite our attention to the provisions of the central excises and customs laws amendment act no. 40 of 1991, which came into force on september 20, 1991 and contended that in the event of this court coming to the conclusion that the petitioners are entitled to the benefit of exemption under the said notification, exh. 'f', the proper order to make would be to require the petitioners to approach the authorities who will decide such a claim in accordance with law. 12. it is necessary to deal with the preliminary objection first. in support of his preliminary objection that it may not be proper for this court to entertain this writ petition, shri desai has invited our attention to the judgments of the supreme court in the cases of - (i) k. s. rashid and son v. income-tax investigation commission and others, reported in : [1954]25itr167(sc) ; (ii) titaghur paper mills co. ltd. and another v. state of orissa and another, reported in : [1983]142itr663(sc) ; and (iii) assistant collector of central excise, chandan nagar, west bengal v. dunlop india ltd. and others, reported in : 1985ecr4(sc) . in k. s. rashid's case, it is no doubt true that the supreme court has observed that the remedy under article 226 of the constitution of india was a discretionary remedy and the high court always has the discretion either to grant or refuse any writ. similarly, in titaghur paper mills' case, the supreme court carved out certain exceptions where the high court could entertain a petition under article 226 of the constitution despite the availability of an alternate remedy. in para 7 of the judgment at page 606 of the report, the supreme court referred to the question of absence of jurisdiction and of a provision being ultra vires. similarly, in the case of dunlop india ltd., the supreme court did say that article 226 was not meant to short-circuit or circumvent the statutory procedure. however, it must be remembered that this petition was filed in 1982. certain interim orders have been passed, under which the petitioners have availed substantial benefits. the petition has been pending in this court for nearly 10 years. both counsel are agreed that the pendency of the writ petition in the delhi high court and any decision arrived at in the said writ petition has no bearing whatsoever on the questions of law raised in this writ petition. either on the question of grant of performa credit under rule 56a or on the question of exemption under the notification, exh. 'f', the counsel on either side are agreed that the writ petition pending in the delhi high court can have no bearing at all. on the questions of law, the parties have addressed us at length. there is hardly any disputed question of facts involved in the petition. hence, we are of the view that it would not be proper, at this stage, to drive the petitioners in this case to the alternate remedy of appeals under the statute and further delay the proceedings. it must, however, be mentioned in this context that against the impugned communication, exh. 'u', the petitioners have already filed an appeal under section 35 of the central excises and salt act which is pending. since, however, we have heard both the counsel at length on the question of interpretation of the relevant rules and the relevant notification, exh. 'f', we do not think that in the facts of the present case, having regard to the pendency of the petition in this court for the last 10 years, we should now direct the petitioners to pursue the remedy of an appeal. the preliminary objection raised by shri desai is, therefore, overruled. 13. coming to the merits, the first contention relates to the grant of performa credit to the petitioners. in view of the rival submission, it is necessary to consider the relevant provisions of rule 56a of the central excise rules, 1944, which read as under :- 'rule 56a. special procedure for movement of duty paid materials or component parts for use in the manufacture of finished excisable goods. (1) notwithstanding anything contained in these rules, the central government, may, by notification in the official gazette, specify the excisable goods in respect of which the procedure laid down in sub-rule (2) shall apply. (2) the collector may, on application made in this behalf and subject to the conditions mentioned in sub-rule (3) and such other conditions as may from time to time be prescribed by the central government, permit a manufacturer of any excisable goods specified under sub-rule (1) to receive material or component parts of finished product like asbestos cement, on which the duty of excise or the additional duty under section 3 of the customs tariff act, 1975 (51 of 1975), hereinafter referred to as the countervailing duty, has been paid in his factory for the manufacture of these goods or for the more convenient distribution of finished product and allow a credit of the duty already paid on such material or component parts or finished product, as the case may be : provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods - (i) if such finished excisable goods produced by the manufacturer are exempt from the whole of the duty of excise leviable thereon or are chargeable to 'nil' rate of duty, and (ii) unless - (a) duty has been paid for such material or component parts under the same item as the finished excisable goods, or (b) remission or adjustment of duty paid for such material or component parts has been specifically sanctioned by the central government : similarly, the relevant portion of sub-rule (3) reads as under :- (3)(i) a manufacturer so permitted shall - (a) give prior notice to the proper officer before the excise duty paid or the countervailing duty-paid material or component parts or finished product are received in his factory to enable the proper officer to be present at the time of the receipt of such material or component parts of finished product, as the case may be; (b) bring to the factory the material or component parts or finished product in original packing under cover of a.r.i. of such other documents as may be approved by the central board of excise and customs in this behalf of bill of entry evidencing the payment of excise duty or the countervailing duty; 14. in view of the above provisions of rule 56a, what shri korde contends is that the notification at exh. 'f' contemplates grant of performa credit and in order to be eligible to claim the benefit of the said notification, all that is required under the proviso to the notification, exh. 'f', is that the petitioners must comply with the procedure set out in sub-rule (3) of rule 56a. as against this, what shri desai contends is that having regard to the scheme of rule 56a, it is clear that sub-rule (1) of the rule 56a contemplates that the state government by a notification in the official gazette should specify the excisable goods in respect of which the procedure laid down in sub-rule (2) shall apply. such a notification has been issued under sub-rule (1) of rule 56a setting out the list of goods to which performa credit procedure is applicable. there is no controversy before us that in the items from serial nos. 1 to 58 in the said list none of the items in dispute in the present petition appear viz. tyres, tubes or synthetic rubber. shri desai's contention, therefore, is that since the items which are the subject matter of this petition have not been notified under sub-rule (1) in the official gazette as excisable goods in respect of which the procedure laid down in sub-rule (2) can apply, the petitioners are not entitled to claim the benefit of performa credit under the said notification. what is more, shri desai contends, is that a perusal of sub-clause (a) of clause (ii) of sub-rule (2) of rule 56a requires that the duty has to be paid for such material (tyres, tubes and flaps) or the component parts (synthetic rubber) under the same item as finished excisable goods. admittedly, tyres, tubes and flaps fall under tariff item 16, whereas synthetic rubber falls under tariff item 16aa. since the input or the component part viz. synthetic rubber and the finished excisable goods viz. tyres or tubes, do not fall in the same tariff item as required by sub-clause (a) of clause (ii) of sub-rule (2) of rule 56a, shri desai contends that in any case the petitioners would not be entitled to claim the benefit of performa credit under the said notification. having heard the counsel for the parties, there is no dispute before us that as far as compliance with sub-rule (1) or sub-clause (a) of clause (ii) of sub-rule (2) of rule 56a is concerned, the petitioners do not satisfy the said conditions. a perusal of the list of goods, to which the performa credit procedure is applicable by virtue of the notification issued by the central government under sub-rule (1) of rule 56a, clearly shows that neither the finished excisable goods nor the component part form part of the long list of items mentioned in the said notification. therefore, there is no compliance with sub-rule (1) of rule 56a. similarly, there is no controversy before us that in the present case the component part and the finished excisable goods do not fall in the same tariff item inasmuch the input of synthetic rubber falls under tariff item 16aa whereas the finished products viz. tyres, tubes and flaps, fall under t.i. 16. in our view, therefore, the petitioners would not be entitled to claim any performa credit under rule 56a in the facts of the present case. 15. at the end of the arguments in the course of his rejoinder shri korde invited our attention to a decision of this court in the case of jaysynth dyechem pvt. ltd. v. union of india, reported in : 1991(51)elt246(bom) and contended that the benefit of performa credit can be claimed even under the exemption notification, exh. 'f'. on a perusal of the said decision in the case of jaysynth dyechem pvt. ltd. (supra) we are of the view that the question which fell for consideration of the court was in relation to the grant of exemption subject to following the procedure laid down in rule 56a. this was a case of claim for grant of exemption and not for granting performa credit. shri korde then invited our attention to the decision of a learned single judge of this court in the case of steel age industries ltd. and another v. union of india and others, reported in : 1988(36)elt24(bom) . it was held in this case that rule 56a prescribes the procedure to be complied with for availing of the benefit under the notification no. 95/79 dated 01-03-1979. on behalf of the petitioners - a public sector undertaking - the argument was that compliance with the procedure of rule 56a need not be strict compliance. rejecting this argument, the learned single judge observed thus in para 5 of the judgment on page 26 of the report :- 'it has not been possible for me to accept this interpretation of the rule made by mr. andhyarujina. the rule insists that particular documents ought to be produced. the document on which the petitioners want to place reliance is not one of the documents mentioned in the relevant rule. the relevant rule does not give discretion to the assistant collector to accept any other documents for being satisfied that excise duty has been paid on the product in respect of which credit is being claimed. it may be, in the present case sail is a company in the public sector. but a rule cannot be interpreted in one way in the case of a public sector undertaking and in another way in the case of a non-public sector undertaking'. in view of the above, we do not think that the ratio of any of the said two decisions can help the petitioners on the question of availing of the performa credit under rule 56a. 16. the second contention advanced by shri korde is that having regard to the process of manufacture, at any rate, the petitioners are entitled to claim exemption from so much of the duty of excise leviable on the finished products of tyres and tubes as is equivalent to the amount of duty of excise paid on input of synthetic rubber. the argument revolves round the words 'used in the manufacture of the final products' appearing in the first proviso to the notification at exh. 'f' reproduced above. whereas shri korde's contention is that synthetic rubber is used in the manufacture of the final product, viz. tyres, shri desai's contention is that synthetic rubber is used in the processing of tcws, which is an intermediate product. according to shri desai, since the tcws is not the product mentioned in column 5 of the exemption notification at exh. 'f', the petitioners are not entitled to exemption either. however, shri korde has invited our attention to some of the supreme court decisions which have a direct bearing on the question involved. we may briefly refer to the said decisions. 17. in the case of j.k. cotton spinning & weaving mills co. ltd. v. the sales tax officer, kanpur and another, reported in 1965 16 stc 563, the expression 'in the manufacture of goods' appearing in section 8(3)(b) of the central sales tax act, 1956 fell for interpretation. it has held that the expression 'in the manufacture of goods' appearing in section 8(3)(b) of the said act should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. where any particular process is so integrally connected with the ultimate production of the goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, goods required for that process would fall within the expression 'in the manufacture of goods'. in the case before the supreme court, the process of designing was held to be distinct to the actual process of turning out finished goods viz. textile, but there was no warrant for limiting the meaning of the expression 'in the manufacture of goods' to the process of product of goods only. at page 568 of the report, the supreme court observed, thus :- 'the expression 'in the manufacture of goods' should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression 'in the manufacture of goods'. for instance, in the case of cotton textile manufacturing concern, raw cotton undergoes various processes before cloth is finally turned out. cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendered and pressed. all these processes would be regarded as integrated processes and included 'in the manufacture' of cloth. it would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth'. 18. shri korde then invited our attention to the judgment of the supreme court in the case of collector of central excise v. eastend paper industries ltd., reported in : 1989(43)elt201(sc) . the question that fell for consideration of the supreme court was whether 'wrapping paper' which is used for wrapping the paper which is marketed in a packed or wrapped condition would be treated as a raw material or component part for the other variety of paper which was wrapped. this was a case under the central excises and salt act, 1944, and it was contended on behalf of the revenue that wrapping paper which was used for wrapping the finished product viz. paper could not be said to be a raw material or a component part for the paper which was wrapped inside. the supreme court rejected the contention on behalf of the revenue and held that it was settled law that excise was a duty on manufacture. . (supra). 19. our attention has then been invited to the supreme court decision in the case of collector of central excise v. ballarpur industries ltd., reported in : 1990ecr279(sc) . the question here was whether sodium sulphate which was used in the chemical recovery cycle of sodium sulphate which forms an essential constituent of sulphate cooking liquor used in the digestion operation of paper and paper-boards could be said to be used in the manufacture of finished product. the argument of the revenue was that the benefit could not be claimed by the assessee since sodium sulphate was burnt out and did not remain in the finished product as such. it was, therefore, contended that sodium sulphate did not form part of the finished product so as to claim benefit of the exemption notification. the supreme court rejected the argument of the revenue and held that the definition of manufacture in section 2, clause (f) of the central excises and salt act takes within it all ancillary and incidental processes. in para 5 of the judgment, at page 809 of the report, the supreme court observed as under :- 'the ingredients used in the chemical technology of manufacture of any end product might comprise, amongst others, of those which may retain their dominant individual identity and character throughout the process and also in the end-product; those which, as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end-product : those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end products and those, as here, which might be burnt-up or consumed in the chemical reactions. the question in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called 'raw-material' for the end-product. one of the valid tests, in our opinion, could be that the ingredient should be so essential for the chemical processes culminating in the emergence of the desired end-product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burning-up is its quality and value as raw-material. in such a case, the relevant test is not its presence in the end-product, but the dependence of the end-product for its essential presence at the delivery end of the process. the ingredient goes into the making of the end-product in the sense that without its absence the presence of the end-product, as such, is rendered impossible. this quality should coalesce with the requirement that its utilisation is in the manufacturing process as distinct from the manufacturing apparatus.' in the result, the supreme court held in para 8 of the judgment at page 810 of the report that sodium sulphate was used in the manufacture of paper as raw material within the meaning of the relevant notification. 20. finally, shri korde invited our attention to the supreme court decision in the case of collector of central excise v. rajasthan state chemical works, reported in : 1991ecr465(sc) . this was a case where the question was as to whether the assessee was entitled to claim the benefit of the exemption notification in respect of all the goods falling under residuary item no. 68 of the first schedule to the central excises and salt act, 1944, in or in relation to the manufacture of which no process was ordinarily carried out with the aid of power. in relation to the manufacture of final product, it was held that manufacture involves series of processes and if power was used for the purpose of transportation of the raw material to the platform at the kiln head and the pumping of brine into the salt pan, it must be held that power was used in relation to manufacture. in para 12 of the judgment at page 448 of the report, the supreme court observed thus in respect of the word 'manufacture' : '12. manufacture thus involves series of processes. process in manufacture of in relation to manufacture implies not only the production but the various stages through which the raw materials subjected to change by different operations. it is the cumulative effect of the various process to which the raw material is subjected to, manufactured product emerges. therefore, each step towards such production would be a process in relation to the manufacture. where any particular process is so integrally connected with the ultimate production of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture.' in para 14 on page 448 of the report the supreme court referred to the case of j.k. cotton mills (supra) and finally held in para 17 at page 449 that the transfer of raw material to the reacting vessel is a preliminary operation but is a part of a continuous process but for which the manufacture would be impossible. 21. relying upon these four supreme court judgments, shri korde contended that the words 'used in the manufacture of final product' appearing in the first proviso to the notification exh. 'f', must be given a wide meaning and not a restricted meaning as contended by shri desai. since synthetic rubber was used in the dip solution for processing tcws, which processed tcws is used in the manufacture of finished product, viz. tyres, relying upon the ratio of the above mentioned four supreme court decisions, shri korde contended that synthetic rubber must be held to be used in the manufacture of the final product viz. tyres in the facts of the present case. according to the learned counsel, the fact that an intermediate product called processed tcws comes into being was wholly immaterial having regard to the ratio of the supreme court decisions. the averments in the petition show that the entire processed tcws in the factory of the first petitioner is used in the manufacture of tyres. this was not disputed before us. in view of the ratio of the supreme court decisions, we are inclined to accept shri korde's submission that, in the facts of the present case, having regard to the process of manufacture of tyres and the use of synthetic rubber therein, the petitioners would be entitled to claim the benefit of the exemption notification viz. exh. 'f'. 22. shri desai, however, contends that in the event of the petitioners being held eligible to claim the benefit of the exemption notification exh. 'f', the petitioners will have to approach and satisfy the concerned authorities in accordance with the amended law. he has invited our attention to - (i) the decision of the division bench of karnataka high court in the case of union of india v. southern asbestos cement ltd., reported in : 1992(60)elt185(kar) ; and (ii) the decision of this court in the case of western india texturizers ltd. v. union of india, reported in : 1992(60)elt200(bom) . relying upon the provisions of the amending act no. 40 of 1991, which came into force on september 20, 1991, shri desai contended in the light of the said two decisions that the proper remedy for the petitioners to adopt would be to approach the concerned authorities who would decide the claim of exemption in accordance with law. we are inclined to accept this submission. 23. shri desai then invited our attention to the interim order obtained by the petitioners on 17-01-1983. the said interim order reads as under :- 'minutes of the order 1. petition admitted. rule returnable on 4th april, 1983. 2. interim relief in terms of prayer(c). 3. the 1st petitioner to furnish the requisite b-13 bond to the collector of central excise within four weeks from the end of each quarter for the full amount of the performa credit utilised by the 1st petitioner in the previous quarter, along with a bank guarantee of a nationalised bank or a scheduled bank to the extent of 50% of the value of the bond. 4. the respondents are at liberty to make provisional assessments in respect of the performa credit availed of by the 1st petitioner as mentioned above, but they will not enforce the demands pending the hearing and final disposal of the petition. 5. the 1st petitioners undertake to pay interest at the rate of 12% per annum on the amounts mentioned in clause 3 above from the end of the respective quarters till the date of payment, in the event of the petitioners not succeeding finally. dated this 17th day of january, 1983.' 24. it will be clear from the above order that the interim relief in terms of prayer(c) of the petition was granted and the first petitioner was directed to furnish the requisite bond for the full amount of performa credit utilised by the first petitioner. by clause (4) of the interim order, the respondents were at liberty to make provisional assessments in respect of the performa credit availed of by the first petitioner. however, clause (5) makes it clear that the first petitioners undertake to pay interest at the rate of 12% per annum on the amounts mentioned in clause (3) above viz. the amount of performa credit in the event of the petitioners not succeeding finally. in the view which we are taking viz. that the petitioners are not entitled to performa credit, it would follow that as far as the final order in this petition is concerned, the respondents would now be entitled to recover the benefit availed of by the petitioners by way of performa credit under the interim order dated 17-01-1983 and the petitioners would be liable to pay the said amount to the respondents with interest at the rate of 12% per annum, as provided for in clause (5) of the interim order. since on the question of performa credit we have held that the petitioners are not entitled to claim the benefit of performa credit, it would follow that in terms of clause (5) of the interim order the petitioners are liable to pay the said amount to the respondents with interest thereon at the rate of 12% per annum. 25. we make it clear that as far as the question of benefit of exemption under notification, exh. 'f', is concerned, in the light of the four supreme court decisions cited by shri korde, the petitioners would be entitled to claim the benefit of the exemption notification, exh. 'f'. however, for claiming the said benefit, it is necessary for the petitioners to approach the concerned authorities who would then decide the claim of the petitioners in accordance with law in the light of the two decisions referred to in para 22 above. 26. since the petitioners' main contention in respect of the grant of performa credit has been negatived by us, it would follow that the respondents would be entitled to encash the bank guarantee and recover the balance of the amount covered by the bonds furnished by the petitioners. the said bank guarantees and bonds will not be encashed till the expiry of the period of 8 weeks from today. 27. in view of the above, rule stands discharged with costs. at this stage, shri korde applies for stay of the operation of this order for a period of 12 weeks. shri desai vehemently opposes. having regard to the controversy involved, we grant 8 weeks' stay. 28. supply of certified copy to be expedited.